The government wants to reduce the consumption of electricity by 5%.  The price elasticity of demand for electricity is -0.4.  The government should      A) lower the price of electricity by 0.4%. B) raise the price of electricity by .08%. C) raise the price of electricity by 12.5%. D) raise the price of electricity by 2%.

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Chapter1: Making Economics Decisions
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Hello, Please can someone answer those questions? Very important, please.

 

14) The government wants to reduce the consumption of electricity by 5%.  The price elasticity of demand for electricity is -0.4.  The government should     

  1. A) lower the price of electricity by 0.4%.
  2. B) raise the price of electricity by .08%.
  3. C) raise the price of electricity by 12.5%.
  4. D) raise the price of electricity by 2%.

15) If the charge for a phone call were higher between 8am and 6pm than between 6pm and 8am this could be explained by the fact that the demand for phone calls is ________ between 8am and 6pm and the demand for phone calls is ________ between 6pm and 8am.     

  1. A) less elastic, more elastic B) perfectly elastic, perfectly inelastic
  2. C) more elastic, less elastic D) zero, one

16) Which of the following is likely to have the most elastic demand?     

  1. A) Non-alcoholic beverages B) Soft drinks
  2. C) Beverages D) Pepsi

17) Tennis balls cost £20 a set and tennis rackets cost £300.  Which of the following is TRUE?     

  1. A) The price elasticity of demand must be the same for both tennis balls and tennis rackets since they are complements.
  2. B) The demand for tennis balls is perfectly inelastic since they can be used only if you own a tennis racket.
  3. C) The demand for tennis balls is likely to be less elastic than the demand for tennis rackets.
  4. D) The demand for tennis balls is likely to be more elastic than the demand for tennis rackets.

18) A restaurant owner knows that the demand for hamburgers is elastic.  If she wants to increase total revenue from hamburger sales, she should     

  1. A) increase the price of hamburgers.
  2. B) decrease the price of hamburgers.
  3. C) keep the price of hamburgers constant.
  4. D) decrease the supply of hamburgers

19) If your income increased by 10% and the quantity of pizza you demanded increased by 5%, your income elasticity of demand for pizza is     

  1. A) 10%. B) -2. C) 2.      D) 0.5.

20) If the cross-price elasticity of demand between two goods is negative, then the two goods are     

  1. A) substitutes.
  2. B) normal goods.
  3. C) unrelated goods.
  4. D) complements

21) If marginal utility has become negative, we can infer that     

  1. A) total utility is also negative.
  2. B) total utility is falling with additional consumption.
  3. C) total utility is increasing by smaller and smaller amounts.
  4. D) the product is an inferior good.

22) Assume your demand for Tango remains constant, but the price of Tango increases. Your consumer surplus     

  1. A) increases.
  2. B) decreases.
  3. C) remains constant.
  4. D) may increase or decrease depending on the amount of the price decrease

23) Which of the following is an example of adverse selection?     

  1. A) Individuals who have a history of not being careful with their possessions are more likely to insure them against accidental damage.
  2. B) Individuals with makes of cars that are widely known to be the target of car theft are more likely to insure their car.
  3. C) Individuals with possessions that are costly to replace are more likely to insure them against accidental damage.
  4. D) all of the above

24) Assume that you bet £20 on the roll of a die.  If the die lands with a six facing upwards you win £100, if any other number lands face-up you lose your £20.  To an economist you would be operating under       

  1. A) uncertain conditions.
  2. B) conditions of risk.
  3. C) a black market.
  4. D) It is not possible to say from the information provided.

25) Which of the following is most likely to be a variable cost for a firm?      

  1. A) The monthly rent on office space that it leased for a year
  2. B) The taxes that are paid on employee wages
  3. C) The interest payments made on loans
  4. D) The franchiser's fee that a restaurant must pay to the national restaurant chain

26) Which of the following is a fixed cost for a chocolate factory over the course of a month?     

  1. A) Depreciation of machines due simply to their age
  2. B) Overtime pay
  3. C) The cost of cocoa
  4. D) The cost of electricity (paid quarterly) for running the mixing machines

27) A firm in a perfectly competitive market has no control over price because     

  1. A) there is free entry and exit from the industry.
  2. B) every firm's product is a perfect substitute for every other firm's product, and there is a very large number of firms in the industry.
  3. C) the government imposes price ceilings on the products produced in perfectly competitive industries.
  4. D) the market demand for products produced in perfectly competitive industries is perfectly elastic.

28) The following table shows costs and revenue schedules for a firm.

QuantityAC (£)MC (£)        AR (£) MR (£)

100     3.20    3.00    3.00    3.00

200     2.80    2.80    3.00    3.00

300     2.84    3.00    3.00    3.00

400     3.00    3.60    3.00    3.00

500     4.00    6.00    3.00    3.00

600     6.00    9.00    3.00    3.00

At what output will the firm maximise profit?     

  1. A) 400      B) 300      C) 600      D) 200

 

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